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TMI Blog2022 (1) TMI 76X X X X Extracts X X X X X X X X Extracts X X X X ..... ervations made by the Hon‟ble Delhi High Court on the genuineness of the transactions in the ordinary course of business and the element of reasonable cause‟ thereon, would still remain applicable and would have more persuasive value. In view of our aforesaid observations and respectfully following the aforesaid judicial precedents relied upon hereinabove, we hold that the ld. CIT(A) had rightly held that no penalty u/s.271D/271E of the Act could be levied in respect of transactions. Accordingly, the grounds raised by the Revenue are dismissed. - ITA No.3038/Mum/2019 And ITA No.3046/Mum/2019 And ITA No.3049/Mum/2019 And ITA No.4054/Mum/2019 - - - Dated:- 25-11-2021 - Shri C.N. Prasad, Judicial Member And Shri M.Balaganesh, Accountant Member For the Revenue : Shri C.T. Mathews Shri Tharian Oommen For the Assessee : Shri Niraj Sheth ORDER PER M. BALAGANESH (A.M): These appeals in ITA Nos.3038/Mum/2019, 3046/Mum/2019, 3049/Mum/2019 4054/Mum/2019 for A.Y.2014-15 2015-16 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-49, Mumbai in appeal No.CIT(A)-49/IT-84/2017-18, CIT(A)-49/IT-85/DC.CC.7(3)/2017-18, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncern of the assessee. The amount payable to AAP by the assessee was adjusted against the amount receivable from flat booking in SNCML. HT Media Ltd. is a vendor which provides advertisement service in newspaper. The assessee had amount payable to HT Media Ltd. on account of advertisement. HT Media Ltd. had received advance from Lodha Developers Pvt Ltd, a holding company of the assessee. Amount payable to HT Media Ltd by the assesses was adjusted against the advance paid by Lodha Developers Pvt Ltd. Maninder Chhabra is an employee of the assessee company who has booked flat in project being developed by Lodha Developers Pvt. Ltd., a holding company of the assessee company. The amount payable to him was adjusted against the amount receivable from flat booking in Lodha Developers Pvt Ltd. M/s Mangal Paper Mart (MPM) is a vendor which provides advertisement and publicity material, printing of visiting cards etc. The assessee had amount payable to MPL on account of printing advertisements. MPL has booked flats in project being developed by Lodha Novel Buildfarms Private Limited, a sister concern of the assessee. The amount payable to MPL by the assessee was adjusted a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ices in case of each invoice is to be adjusted against the flat booked by MPM in LNBPL and the balance amount of the invoice is to be paid. Accordingly, the assessee company transferred 50% of the value of advertisement services to LNBPL for adjustment against the flat booked in LNBPL and the balance amount was paid through proper banking channels. Mr. Maninder Chhabra is an employee of the assessee company who booked a flat in a project which was developed by Lodha Developers Pvt. Ltd., the amounts payable to Mr. Maninder Chabbra on account of vested employee benefits were adjusted against the amounts receivable from flat booking in Lodha Developers Pvt. Ltd. M/s. Alakh Advertising Publicity Pvt Ltd (AAPPL) entered into an agreement with Shreeniwas Cotton Mills Ltd (SNCML) according to which 50% of the value of advertisement services in case of each invoice is to be adjusted against the flat booked by AAPPL in SNCML and the balance amount of the invoice is to be paid. Accordingly, the assessee company transferred 50% of the value of advertisement services to SNCML for adjustment against the flat booked in SNCML and the balance amount was paid through proper banking channels. Jaw ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T(A) gave a categorical finding that the transactions carried out with the aforesaid three parties i.e. Jawala Real Estate Pvt. Ltd., Shreeniwas Cotton Mills Limited Lodha Developers Private Limited, which are subject matter of levy of penalty u/s.271D of the Act were carried out as an act of assigning of receivables or extinguishment of mutual liability of paying / receiving the amounts by the assessee and its sister concern and its sister concerns to third parties. The ld. CIT(A) held that even assuming that this act is in contravention of provisions of Section 269SS of Act, there is reasonable cause for doing the same and therefore, would not attract the provisions of Section 269SS of the Act. The ld. CIT(A) also took cognizance of the fact that the expression reasonable cause has not been defined in the Act, but it has got a wider connotation and thus a sufficient cause. He placed reliance on the decision of the Hon‟ble Supreme Court in the case of Azadi Bachao Andolan vs. Union of India reported in 252 ITR 471 wherein it was held that reasonable cause is a cause which prevents a man of average intelligence and ordinary prudence, acting under normal circumstances with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Yet another categorical finding recorded by the ld. CIT(A) which remain uncontroverted by the Revenue before us is that these transactions were not made by the assessee with a malafide intent to evade tax and that there is no evidence brought on record to even remotely suggest that the assessee company by passing the aforesaid journal entries had sought to introduce its unaccounted income into the system. We find that these are genuine transactions carried out in the normal course of the business of the assessee. Hence, if the aforesaid transactions are looked into from the perspective of the object and intention behind introduction of provisions of section 269SS and 269T of the Act , then the provisions of section 269SS and 269T of the Act cannot be made applicable to the facts of the instant case. Moreover, from the detailed explanation of the aforesaid transactions together with the purpose for which those journal entries were passed, it could be safely concluded that these entries neither reflect any receipt of loan nor repayment of loan. 3.6. We find from pages 5-7 of the impugned penalty order u/s.271D of the Act that assessee has given complete explanation of the tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e amount towards the sale price of the shares. Neither the genuineness of the receipt of loan/deposit nor the transaction of repayment of loan by way of adjustment through book entries carried out in the ordinary course of business has been doubted in the regular assessment. There is nothing on record to suggest that the amounts advanced by Investment Trust of India to the assessee represented the unaccounted money of the Investment Trust of India or the assessee. The fact that the assessee company belongs to the Ketan Parekh Group which is involved in the securities scam cannot be a ground for sustaining penalty imposed under Section 271E of the Act if reasonable cause is shown by the assessee for failing to comply with the provisions of Section 269T. It is not in dispute that settling the claims by making journal entries in the respective books is also one of the recognized modes of repaying loan/deposit. Therefore, in the facts of the present case, in our opinion, though the assessee has violated the provisions of Section 269T, the assessee has shown reasonable cause and, therefore, the decision of the Tribunal to delete the penalty imposed under Section 271E of the Act deserves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Bridge Co. Ltd. (supra), considered a similar case where a company had paid money to the Government of Delhi for acquisition of a land on behalf of the assessee therein. The Assessing Officer levied a penalty under Section 271D of the Act for alleged violation of the provisions of Section 269SS of the Act since the books of the assessee reflected the liability on account of the lands acquired on its behalf. On appeal, the CIT (Appeals) affirmed the penalty. The order of the CIT was successfully impugned by the assessee before the ITAT. On appeal, this Court held as under:- While holding that the provisions of Section 269SS of the Act were not attracted, the Tribunal has noticed that: (i) in the instant case, the transaction was by an account payee cheque, (ii) no payment on account was made in cash either by the assessed or on its behalf, (iii) no loan was accepted by the assessee in cash, and (iv) the payment of ₹ 4.85 crores made by the assessee through IL FS, which holds more than 30 per cent. of the paid-up capital of the assessee, by journal entry in the books of account of the assessed by crediting the account of IL FS. Having regard to the aforenote ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1 Sanathnagar Enterprises Ltd (SEL ) 4,16,589 2 Shreeniwas Cotton Mills Limited (SNCML ) 1,49,18,965 3 National Standard India Ltd (NSIL) 15,40,133 4 Sahajanand Hi Tech Construction Pvt Ltd (SHTCPL) 31,88,759 TOTAL 2,00,64,445/- 6.1. The transactions were explained by the assessee as under:- M/s Bennett Coleman Co. (BCCL), is a vendor through which advertisements are provided in the newspaper. During the year under consideration M/s. Madison Communication Pvt Ltd, broker of BCCL raised invoices on the SEL, SNCML, NSIL and SHTCPL in respect of advertisement services provided during the year by BCCL. As per the term of the advertisement agreement entered into between BCCL and assessee Company, 66.67% of the value of advertisement services in case of each invoice is to be adjusted against the down payment made by LCBPL to BCCL of ₹ 12,41,91,964/- and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment made earlier by the assessee. Accordingly, the amount payable by Sanathnagar Enterprises Ltd, Shreeniwas Cotton Mills Limited, National Standard India Ltd and Sahajanand Hi-Tech Construction Pvt Ltd. to BCCL was adjusted against the down payment made by the assessee. This adjustment was given effect by way of a journal entry. 6.3. The ld. CIT(A) based on the same reasoning given by him while deleting the penalty u/s.271D of the Act for the A.Y.2014-15, proceeded to delete penalty u/s.271E of the Act also, by categorically holding that assessee indeed had sufficient reasonable cause within the meaning of section 273B of the Act while passing journal entries with a bonafide belief. Hence, there cannot be any levy of penalty u/s.271E of the Act in the facts and circumstances of the instant case. 6.4. We find the entire gamut of the case had been dealt in detail by the ld. CIT(A) in his order which have already been narrated hereinabove. The same are not reiterated herein for the sake of brevity as they remain undisputed. We find from the aforesaid factual narration and the basis of passing journal entries by the assessee in its books that these entries are merely passed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of Triumph International Finance(I) Ltd., reported in 345 ITR 270; the Hon‟ble Delhi High Court in the case of CIT vs Worldwide Township Projects Ltd., reported in 229 Taxman 560 which are already detailed hereinabove. 6.6. In view of our aforesaid observations and respectfully following the aforesaid judicial precedents relied upon hereinabove, we hold that the ld. CIT(A) had rightly held that no penalty u/s.271E of the Act could be levied in respect of transactions with Sanathnagar Enterprises Ltd (SEL), Shreeniwas Cotton Mills Limited (SNCML), National Standard India Ltd (NSIL) Sahajanand Hi Tech Construction Pvt. Ltd., (SHTCPL) totaling to ₹ 2,00,64,445/- in the facts and circumstances of the instant case. Accordingly, the grounds raised by the Revenue are dismissed. 7. In the result, appeal of the Revenue in ITA No.3046/Mum/2019 for A.Y.2014-15 is dismissed. ITA No.3049/Mum/2019 (A.Y.2014-15) 8. The only effective issue involved in this appeal is as to whether the ld. CIT(A) was justified in deleting the penalty u/s.271E of the Act in the facts and circumstances of the instant case. 9. We have heard the rival submissions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue are dismissed. 10. In the result, appeal of the Revenue in ITA No.3049/Mum/2019 for A.Y.2014-15 is dismissed. ITA No.4054/Mum/2019 (A.Y.2015-16) 11. The only effective issue involved in this appeal is as to whether the ld. CIT(A) was justified in deleting the penalty u/s.271D of the Act in the facts and circumstances of the instant case. 12. We have heard rival submissions and perused the materials available on record. We find that assessee is engaged in the business of construction and development of real estate. The ld. Addl. CIT proceeded to levy penalty u/s.271D of the Act in respect of the following transactions:- SN Name of the sister concern Amount (Credits)(Rs.) 1. Lodha Developers Pvt. Ltd., 4,72,84,144 2. Palava Dwellers Pvt. Ltd., 1,7,1579 TOTAL 4,74,55,723 12.1. The assessee explained the aforesaid transactions in the following manner:- M/s Bennett Coleman Co. Ltd (BCCL ..... X X X X Extracts X X X X X X X X Extracts X X X X
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